OK, to narrow this down let's try the following:
1. stop the launcher service ("net stop dclauncher" from a cmd window). This will disable the account.
2. using the windows user management tool, enable the account and set a password to your liking.
3. logon to the machine locally, using that account and the password you just set. I'd assume this will fail, but now the event log hopefully has a better hint as to what's wrong precisely.
4. start the launcher again and look for clues in the Windows event log.
I really hope that helps...